MSFT FY2Q26: Can Copilot Studio Change the Narrative That Microsoft's Software Business Will Be Disrupted by LLMs?

Review of Our Views on MSFT Over the Past Year

FY3Q25: We believed that as Azure decoupled from OpenAI, Azure began to have more GPUs available for external leasing, and we thought Azure would slightly beat expectations amid low sentiment.

FY4Q25: We maintained our 1Q25 view.

FY1Q26: We were optimistic about the revenue contribution of mid-training to Azure CPU and storage services, but that quarter Azure actually missed buyside expectations due to capacity constraints.

This quarter: We observed that while M365 Copilot progress was mixed, Copilot Studio significantly exceeded expectations and is likely to drive Copilot acceleration. At the same time, Azure’s capacity constraints are expected to be resolved in CY1Q26.

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